Truth Social, the SEC and Democracy - Part 3
Truth Social, the SEC and Democracy - Part 3
Part 3 of 4
Read Part 1 | Read Part 2
Messy controversies have been Donald Trump’s stock in trade his entire life. We don’t need to repeat them, but do note the Lincoln Project video Fred. It encapsulates Trump’s sordid life in a haunting takedown magically “delivered” by his own criminally-inclined father.
Having made Donald heir to his real estate racket, Fred would have undoubtedly embraced the concept of a SPAC (Special Acquisition Company), which effectively does an end run around traditional IPOs (Initial Public Offerings) using OPM (Other People’s Money). When Trump aligned himself with the SPAC formed by Digital World Companies, the ex-president was positioning himself to reap close to a cool $4 billion from the anticipated merger with his Truth Social media platform.
Now for the sticky part …
As previously noted, the entities had to get prior approval from the SEC in order for the deal to proceed. The process that began in 2021 was held up for two years when the agency discovered suspicious activity that required investigation. The extensive federal probe included a confidential informant, a secret airport phone scan, and an elite anti-money-laundering squad, resulting in indictments for three of the deal’s insiders. Hefty fines were imposed and once those were resolved, the SEC (Securities and Exchange Commission) cleared the merger for approval on February 16.
The Washington Post called it “a windfall” for the former president. Bloomberg said it was a “financial lifeline” as Trump faces enormous liability in New York State for his decades of financial fraud. However, the rosy news quickly yielded a wave of lawsuits from former associates to block the merger, accusing Trump of trying to dilute the value of their shares. The deal is now in limbo.
This standoff led to Digital World bringing a countersuit on March 19, 2024 to force a vote of its board on March 22, 2024, believing that would override the latest snag and the deal would finally be done. While that outcome remains to be seen, there’s a bigger fly in this ointment. Why would the SEC approve such a lucrative deal for someone found guilty of massive financial fraud and misleading financial information? The agency’s own mission is to protect the country from that behavior. It would have made far more sense for the SEC to decide, like so many have, that Donald is a very bad bet and his tawdry business practices don’t merit their greenlight.
Are you wondering what this has to do with democracy? Remember that the SEC is an independent federal agency, headed by a five-member Commission. The Commissioners are appointed by the President and confirmed by the Senate, and the President designates one of the Commissioners as the Chair. Just another reason that your vote matters.
Post submitted by Barbara Holzer, a volunteer with The Union.
Note: The views and opinions expressed by volunteer contributors are those of the authors and do not necessarily reflect the positions of The Union, a single-issue organization that welcomes all and is dedicated to protecting democracy.
If you’d like to help defend democracy in the US, we invite you to join The Union.
What is unclear to me is the role Trump plays in the SPAC. It's clear he will benefit from its success. But the SEC's approval of it may be normal - even though Trump has been found guilty of fraud - if he is organizationally distant in the operation of the SPAC.
At best liquidity is a 6 month waiting period out. Lots will happen before we reach the 6 month period prior to any transaction on a large number of shares.